Is this the end of the line for the “pharma bro” with the perpetual smirk?
Martin Skhreli was found guilty on Friday of three counts of fraud after a five-week trial in federal court in Brooklyn, N.Y. He faces a prison sentence of up to two decades.
“This was a witch hunt of epic proportions,” Shkreli said outside court after the verdict, the Washington Post reported. “They may have found some broomsticks.”
The big question now: Can the pharma industry finally slam the door on Shkreli, after complaining for nearly two years that his price-hiking antics tainted the reputation of the entire field?
“Shkreli was a perfect villain, and it was easy for casual observers to conflate him with ‘big pharma’ more broadly—despite the fact that their approaches are completely different,” said Scott Hinds, an analyst at Sector & Sovereign Research. In his view, the industry “caught a lot of unjustified shrapnel” thanks to Shkreli.
The conviction—on some, but not all, of the eight counts he was charged with — gives others in the sector even more reason to declare at full volume that Shkreli is not one of them, “and allows them to distance themselves from his predatory practices,” said Robert Mintz, a former federal prosecutor who is head of the white collar defense practice at McCarter & English, which represents branded pharmaceutical companies in a number of practice areas.
“As a result of his conviction, most pharmaceutical and biopharma companies will likely distance themselves from Shkreli—but they tended to do that anyway given his eccentric and controversial behavior,” Mintz said.
Though Shkreli is best known for hiking the price of a decades-old drug by 5,000 percent when he led Turing Pharmaceuticals, this trial related to an entirely different matter: Ponzi-like fraud. Specifically, Shkreli was accused of eight counts of securities wire fraud linked to his behavior at two hedge funds and at a previous biopharma company he led, Retrophin Pharmaceuticals.
The government presented 33 binders of evidence against Shkreli during the course of the trial. Prosecutors showed that he lost all of his investors’ money in one hedge fund, and sought to prove that he funneled money from the second into Retrophin’s coffers. Shkreli did not take the stand in his own defense, though he did talk to reporters during the trial, complaining that people “blame me for everything.” (He also called the prosecutors working the case against him “junior varsity.”)
Shkreli’s defiant decision to raise the price of Daraprim, a drug that dates to the 1950s and is the standard treatment for a life-threatening parasitic infection, from $13.50 to $750 per tablet overnight, helped spark more than a year of public outrage and political fulminating against high drug prices. Both Hillary Clinton and Donald Trump ran on the issue during the presidential campaign. Congress even called Shkreli in to testify at a public hearing — and then members upbraided him as he smirked through the hearing.
“It’s not funny, Mr. Shkreli. People are dying,” Rep. Elijah Cummings (D-Md.) said.
But the fury did not lead to any political actions to rein in drug prices.
Even President Trump, who memorably accused pharma execs of “getting away with murder” shortly before his inauguration, has changed his tune. At a recent White House event, he hailed those same pharma executives as “business geniuses.” And a draft executive order on drug pricing, which has not been finalized, includes many policies on pharma’s wish list, including extending patents for drugs sold overseas.
“Nothing’s changed,” said Mark Baum, CEO of San Diego-based Imprimis Pharmaceuticals, which began manufacturing a version of Daraprim for 99 cents a pill after Shkreli’s price hike. “In spite of [Shkreli] calling members of Congress—who were his interlocutors — ‘imbeciles,’ policy hasn’t changed at all. This has all been fun to watch, though.”
While there’s been no political crackdown, some pharma CEOs have taken it upon themselves to try to redeem their reputation with the public.
Allergan CEO Brent Saunders put out a “social contract” last fall, pledging not to raise drug prices more than 10 percent a year. (A few months later, the company raised prices on a slew of its drugs by 9 percent.) Novo Nordisk and AbbVie made similar commitments. Pharma giants Merck and Johnson & Johnson, meanwhile, published detailed data about their pricing practices, in a bid to get credit for greater transparency.
And earlier this year, the lobbying group PhRMA launched a multimillion dollar ad campaign designed to repair its image by reminding the public that the industry aims to discover new drugs, not just raise prices on old ones. (PhRMA President Stephen Ubl explicitly framed the campaign as a rejection of Shkreli, saying the ads are built around the theme of “less hoodie, more lab coats.”)
“It’s pretty clear that these actions are at least in part a response to negative press coverage of the industry, and likely an effort of the larger players to distance themselves from the Martin Shkreli’s of the world,”Hinds said. “In that sense, they’re not just hiding beyond one bad actor; they’re tangibly demonstrating how they are different.”
He pointed out, too, that the rate of drug price hikes has been declining in recent quarters — an indication, he said, that even without political action, “the pricing environment today is already dramatically different from what it was in 2013 to 2015.”
Meanwhile, on the regulatory front, Dr. Scott Gottlieb, the new commissioner of the Food and Drug Administration, has spoken extensively about creating provisions to speed generic drugs to the market. The Shkreli episode helped highlight how many pharmaceutical companies are, in Gottlieb’s words, “gaming” the regulatory system to keep prices high. By increasing competition in the generics market, Gottlieb aims to limit price gouging.
Through it all, Shkreli has clung to the public spotlight. He used an array of social media platforms (until he was banned from some of them) to rail against his enemies, whip up his fan base, and live stream himself playing video games and fiddling with his hair. Even during his trial, he used Facebook to harass a journalist with a lewd comment.
“Given how few allies he has—in the industry or outside of it—I would suspect that a conviction [will] be very satisfying for many, many people,” Hinds said.
“He’ll be an interesting cell mate for someone,” Baum added.
The verdict hadn’t been out more than three minutes before the instant analysis, and wisecracks, started hitting social media:
Never before has one man used his voice so effectively to make sure prosecutors absolutely threw the book at him.— Drew Armstrong (@ArmstrongDrew) August 4, 2017
Would be funny if the judge sentenced him and then raised the sentence by 5000% https://t.co/dMuQQbd0c8— Mark Gongloff (@markgongloff) August 4, 2017